Pay your car loan off quicker in New Zealand! Here’s how…

pay car loan faster
Pay your car loan off quicker in New Zealand

It should be an obvious deduction that paying off any loan as quickly as possible, is the best option for you and your wallet, and car loans are no different. The quicker you pay off your car loan, the less interest you’re incurring and the sooner you’ll have available money again for other purchases once it’s paid off! All sound good? Then let’s look at ways in which to do this.

To speed up the rate of repayment is as simple as 1-2-3… but even though you know what it would entail, it’s always a great way to gets started when you have a step-by-step guide on just how to go about doing it.

Let’s get started!

Step 1 – Increase the frequency of your repayments. Look at the payments you are already making and see how much more you can contribute and add additional payments in the month.
Step 2 – Every year the theory goes that we should have a better income after an annual review of our salaries. If you find yourself with a little extra cash flow each year, consider changing your stop order amount to a higher repayment that won’t necessarily affect your lifestyle!
Step 3 – Review your loan, i.e. interest rates, the value of the car, whatever it is that might have changed that you would need to amend in order to get the best value for the money you are paying.

Make fortnightly payments

If you pay your car loan off in more frequent increments that might suit your budget better. There are instances where individuals receive their wages in weekly or bi-weekly increments. Due to this, you might find that your budget is broken down into these periods as well. Make the payments in line with this to better assist you and also to better manage your loan cost. Splitting it in this way with a higher payment going through to the lender each month, in the end, will reduce the amount of interest you’re paying back.

Increase the repayment amount

Be careful not to get in over your head with increasing this repayment if you have other debts with interest rates. Take a look at your expenses and be savvy with your money. If you have gone through this step and still you feel you can afford to increase the repayment amount on your car loan, this is always a good idea! Make sure your lender doesn’t charge you any penalties for this and once this is cleared up, go ahead and start paying more right away in any of these 3 ways!

  • MAKE AS SINGLE additional payment as a once off due to some spare cash you happen to have, perhaps someone who owed you money has finally paid you back, or perhaps you did a freelance job on the side that brought in something decent that was a one-off. Consider using this money as a once off additional payment to influence your repayment amount or the length of your term.
  • MAKE MULTIPLE additional payments in the year if your income allows for it. If you are in a company that provides quarterly bonuses, you may want to consider making quarterly lump sums toward your repayments. The same could go for bi-annually. Perhaps you have a weekend job that allows for additional income monthly, look at taking a percentage of that and adding it in monthly towards to your repayment.
  • INCREASE YOUR regular repayments by amending your repayment amount monthly with the lender. Call in and request a higher repayment rate, which will ultimately shorten the term of the loan. Remember to check that you aren’t penalised for this.


Is this a good idea or not? Well, that all depends… has your financial situation changed? Perhaps you have left your current job for another, which pays you slightly less? There could be a reason that you need to take out a business loan, or something alike, and the money that you’re paying toward your car loan is impacting your budget negatively for this change. If any of these reasons materialise in your life, then it might be a good time to look at vehicle refinancing

You could go about negotiating a reduction in interest rate and look at changing the frequency of repayments, or even paying off a chunk of your loan and refinance for a smaller amount.

Take a look at the structure of your vehicle loan today before making any decisions and establish what is working for you and what isn’t. Paying off your car loan faster makes smart financial sense. You’ll be reducing the cost of interest and that means that you will free up your cash sooner, making room for newer, shinier purchases!

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